Daniel Kral
@DanielKral1
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Europe macro. Opinions my own. All of them. danielkral on the other platform
Joined February 2013
Despite large cuts to gas consumption since 2022, 🇪🇺 is still at the mercy of the weather with the current cold spell draining storages. Current futures imply gas prices averaging 75% higher in 2025 than last year. Not good news re disinflation and monetary policy easing.
European natural gas prices are near the highest level in two years Whats going on? 🚢 Europe needs to attract more LNG to replace loss of Russian pipeline gas via Ukraine 🥶 Cold outlook risks further storage declines (and refills later) 💴 Funds keep piling on bullish bets
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@BenActonBond The ESI components are dire, new orders to inventories still signalling steep destocking. PMI ticked up (some of it prices) but still in deep contraction. Balance of risks skews to the downside given loss of competitiveness, policy uncertainty at home and abroad plus China shock.
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@AndreaCepova Also evidence of Spain moving up the value chain with booming business services. Given high wage rises and labour shortages in Eastern Europe, looks like Spain is again competitive as a cost centre for multinationals in high value add services industries.
Spain's services exports are a success story and not just thanks to the turnaround in travel since the depths of the pandemic. High value add services have contributed more to the growth of services as a share of GDP, reflecting Spain's abundant and well educated labour force.
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@carlomartu Worth pointing out Croatia gets almost 20mln foreign arrivals a year with a population of less than 4mln (multiplier 5x). In Spain and Portugal, the multiplier is 2x, in Italy 1x. The closest one is Greece with 3.5x. For more on Croatia ⬇️
Croatia's growth is impressive for its magnitude and broad-based nature with almost everything growing above pre-pandemic trend (the reverse of Germany). Only services exports (includes tourism) have lagged lately. The latest success story of the EU convergence machine.
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@aj10497565 @zerodhamarkets There you go
Lots of twitter geniuses piling in saying the rapid debt reduction is all thanks to inflation. In 🇬🇷, real growth has been a more important driver. It subtracted 32.5ppts of GDP from debt, inflation less than 30ppts. In 🇵🇹, both were equally important (19-20ppts of GDP).
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A popular misconception is that @ecb has been propping up 🇮🇹 govt through flexible QE run-off. This is not what the data shows. The ECB is "overweight" debt from 🇫🇷🇧🇪🇸🇮, "underweight" debt from 🇩🇪🇳🇱 (no surprises there) and bang on for 🇮🇹 (where spreads are at multi-year low!).
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As during the energy crisis, 🇪🇺 is in the eye of the storm again. 🇨🇳's aggressive export-led growth model is impacting its industry and exporters the most. And its large surplus with 🇺🇸, but without deep supply-chain linkages like 🇨🇦🇲🇽, means it's unlikely to avoid tariffs.
On China. We will keep de-risking our economies. But there is room to engage and find agreements that could even expand our trade and investment ties. It can lead us to a fairer and more balanced relationship with this giant. And that can make sense for Europe.
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@adriaanschout @JorgeLiboreiro @terischultz @salingergregor Change in 🇩🇰 understandable, given its large support to Ukraine, threats from US and make-up of govt. No official policy change in 🇫🇮 (Finns part of govt), just PM Orpo's opinion. In 🇸🇪, minority govt relies on SD votes (who want UK-style referendum), hard to see a shift on this.
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@adriaanschout @JorgeLiboreiro @terischultz @salingergregor Change in 🇩🇰 understandable, given its large support to Ukraine, threats from US and make-up of govt. No official policy change in 🇫🇮 (Finns part of govt), just PM Orpo's opinion. In 🇸🇪, minority govt relies on SD votes (who want UK-style referendum), hard to see a shift on this.
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Lots of twitter geniuses piling in saying the rapid debt reduction is all thanks to inflation. In 🇬🇷, real growth has been a more important driver. It subtracted 32.5ppts of GDP from debt, inflation less than 30ppts. In 🇵🇹, both were equally important (19-20ppts of GDP).
In Greece and Portugal, public debt ratios have fallen at a record pace from their pandemic highs. chart via @DanielKral1
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🇪🇺's rising trade surplus with 🇺🇸 has been offsetting a rising trade deficit with 🇨🇳. This may soon be over. 🇪🇺 industry now finds itself squeezed between 🇨🇳 on steroids (supply-side stimulus, weak domestic demand, excess capacity) and a protectionist 🇺🇸. It's not looking good.
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Not the best news re January inflation in Eurozone, up at 2.5% - sticky services, stuck at 4% for over a year, with energy no longer disinflationary (more where than came from). A key support has been goods prices at 0.5%. That will change with EU-US tariffs and € depreciation.
Euro area #inflation expected to be 2.5% in January 2025, up from 2.4% in December 2024. Components: services +3.9%, food, alcohol & tobacco +2.3%, energy 1.8%, other goods +0.5% - flash estimate
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